The boards of Fiat Chrysler Automobiles (FCA) and Peugeot (PSA) were to meet separately on Tuesday to discuss finalising an initial agreement for a US$50bn merger to create the world’s fourth largest carmaker, sources told Reuters.

A source “close to FCA” told the news agency the two companies could announce the signing of a binding memorandum early on Wednesday, followed by a conference call to explain further details later in the day.

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The two mid-sized carmakers announced plans six weeks ago for a tie-up to help them deal with big challenges in the industry, including a global demand downturn and the need to develop costly cleaner cars to meet looming anti-pollution rules.

Ahead of the meetings, entities representing the Peugeot family, Etablissements Peugeot Freres (EPF) and FFP, unanimously approved a proposed memorandum of understanding for the planned merger, a source “familiar with the situation” told Reuters.

FCA and PSA had said they would seek to finalise a deal by the end of 2019 to create a group with 8.7m units in annual vehicle sales.

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That would put it fourth globally behind Volkswagen, Toyota and the Renault-Nissan alliance.

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PSA’s Carlos Tavares would be chief executive and FCA’s John Elkann – the scion of Italy’s Agnelli family, which controls FCA through their holding company Exor – chairman of the combined company.

The group would include the Fiat, Jeep, Dodge, Ram, Chrysler, Alfa Romeo, Maserati, Peugeot, Citroen, DS, Opel and Vauxhall brands, allowing it to serve mass and premium passenger car markets as well as those for trucks and light commercial vehicles.